Gov’t gets serious about tech innovation

VietNamNet Bridge – Earlier this year, the government established the National Technology Innovation Foundation (NATIF) with a registered capital of VND1 trillion (US$47 million). The fund aims to foster innovation among Vietnamese businesses and promote the commercialisation of innovative ideas that can create new products and services. Viet Nam News spoke about this initiative to a cross-section of people including officials, experts and entrepreneurs.

* Minister of Science and Technology Nguyen Quan .What are the long-term goals of the foundation?

Minister of Science and Technology Nguyen Quan

The foundation aims at supporting Vietnamese businesses renovate their technologies so that they can compete with foreign businesses. We’re deepening our international integration by lifting tariff and commercial barriers, and if our businesses do not come up with technological innovations, we will lose right in our own backyard.

I believe that if we support our small and medium-sized enterprises with some capital for technological innovation, they can innovate and create new products.

Half the foundation’s capital will be used to fund scientific and technological research and applications carried out by enterprises. The fund will also be used to import technologies and hire foreign experts to serve technological innovation. The other half will be used to guarantee loans or lent in the form of soft loans. In 2015, the foundation will primarily finance research projects and support businesses to apply research done by domestic and foreign institutes and universities. It will not be used to guarantee commercial loans or provide preferential loans as initially planned.

The priority areas for providing funding are the hi-tech sector, information technology, new material technology, biotechnology and automation technology.

Many enterprises have said that it was not easy for them to access foundation previously established by the Government for promoting technological innovation, that the procedures are usually complicated. Will the NATIF be different?

The foundation will operate transparently. Businesses can find more information on the NATIF’s website on how to apply for funding. I must note that Viet Nam has some 500,000 businesses, and the US$47 million will certainly not meet everyone’s demand. Not every business will win funding.

That said, it will be really competitive.

We will try our best to operate the foundation in the most transparent way. And I’m sure we can do it. When enterprises want to have funding in a certain area, they have to come up with project proposals, and these projects will have to be approved by a management body specialising in that area.

Funding, once approved, will be supervised by the ministry and the NATIF. The use of funds will be evaluated and surprise checks carried out to make sure that the initiative is effective.

What if the result of the investment does not meet expectations?

We will have certain regulations for this. If, at the end of the contract’s term, the funded enterprises are unable to create a product as expected, the fund’s management board will have to re-evaluate and find out why. If there are objective reasons for the failure, the enterprise would still have to refund a part of the investment. If there is subjective cause for the failure, the enterprise may have to refund the whole amount. Legal action will be taken in case corruption is involved.

* Prof. Nguyen Duc Thuan, Department of Electronic Technology and Biomedical Engineering, School of Electronics and Telecommunications, Hanoi University of Science and TechnologyAs a scientist, how would you assess the establishment of NATIF?

In the era of international economic integration, especially with the imminent arrival of ASEAN Free Trade and Trans-Pacific Partnership (TPP) agreements, the pressure of all-round competition in products and human resources is going to be huge.

Nothing can save businesses if they do not renew their production technologies and their management. The NATIF shows the Government’s commitment to helping businesses hone their competitive edge and grow.

As Viet Nam lags behind in industry and it has an inadequate contingent of scientists, both in quantity and quality, especially in applied sciences and development of new technology, it is imperative that the Government provides incentives and acts as a babysitter in this pre-development period. A baby must be fully nurtured in order to become wise and strong when it matures, which is also when it can take on large burdens. Through years of serving as both a scientist and manager, I still consider our country’s science and technology sector a growing baby in need of investment and care from the parent – the Government.

The Government has announced a roadmap for investment in science and technology. For example, one of the targets that have been set is for funding for science and technology to account for 1.5 per cent of GDP, but this goal has not been achieved. We also have other national-level science programmes like KC-xx, but this one, now being phased out, has not yielded expected results.

NATIF, which characterises the Government’s switch to applications and especially to the development of products by businesses, can be considered the first step taken in the renovation roadmap by the Ministry of Science and Technology.

What are the challenges that lie ahead in using the foundation’s funds?

One question I have is this: Will the management and administrative procedures for accessing the fund be streamlined so that it can facilitate real technology renovation?

What matters is disclosure, transparency and supervision that will lead to really effective end products.

The biggest concern, I think, is how to remove existing barriers to make it effective. The fund targets businesses and the majority of them now are small and super-small. Even in medium and large businesses, the research and development section is either non-existent or very weak.

What this means is that when businesses receive direct investments from the fund, they are likely to hire someone to effect technological renovation. This usually happens with small businesses. So it is important that the business’s funding for research and development is checked to make sure it is clear and transparent before any decision is taken on allocating the foundation’s funds. If the business’s real capacity is not really understood and is known only on paper, the possibility of losing the investment is high.

Brain drain is said to be happening at an alarming rate, and domestic businesses are not attractive enough for scientists. Do you think the foundation can improve this situation?

From an overall perspective, engaging good scientists and businesses (in renovating technology) depends on the market. Businesses that are well organized, doing well and able to provide better treatment will naturally be more attractive to talent. In this regard, businesses with foreign direct investment have more advantages. However, I feel it is somewhat of an exaggeration to say that the current brain drain is alarming. In fact, the distribution of this workforce also happens in line with the principle of demand and supply. If there is brain drain, how is it happening?

I don’t think we can expect that with one or two research projects financed by the foundation, we can produce good scientists overnight. To attract capable scientists, several things have to be in the mix: corporate growth prospects, chance of personal promotion and sustained good treatment.

I think the best way to make good use of the fund’s allocations for businesses is through the school-business alliance as a mutually beneficial co-existence. They will be bound by each other’s interests and responsibilities, which should be recognised by law to avoid the situation that when one side quits, no one is held responsible as has been the case so far.

CEO of a livestock feed manufacturer in Hung Yen Province, who requested anonymity.

What are your first impressions of the NATIF?

I welcome the idea of investing in science and technology development and I think it is high time that Viet Nam pours more resources into this key area.

On the other hand, from my experience in the agriculture sector, I am afraid VND1,000 billion (approximately $47 million) is not enough to produce a significant impact in just agriculture alone, let alone fisheries, forestry and other sectors. So I’m concerned about how many sectors and businesses it can cover.

Businesses are of different sizes, and VND1 billion ($47,000) might be a lot for a start-up, but for a medium-sized business it’s barely enough to cover part of a single R&D project.

I did not learn about NATIF until now. This shows that for a national fund dedicated to supporting SMEs, they haven’t made it a priority to disseminate this information among the intended beneficiaries.

Did you have any experience in securing funds from Government sources similar to NATIF?

In 2004, I tried to apply for a Government grant under Decision No.191 to build a quick-drying machine based on projects recommended by the MoST.

We went through a lot of trouble to submit all the documents, but we were rejected without even being told why. I would understand if we were turned down for a good reason but nobody bothered to even let us be a part of the review.

I’m afraid if NATIF functions in the same manner, it will leave a lot of unanswered questions as to why one project is turned down and another approved.

Another concern is about under-the-table deals to secure NATIF funding. Corruption is rampant from the ministerial to local level agencies. How much money will actually be used for R&D and how much will be lost in the process?

Enterprises should not have to run after corrupt officials and spend absurd amounts of money to “facilitate” the process to secure much needed R&D funds intended to support them.

What would you recommend to prevent such problems?

A dual monitoring mechanism should be employed to operate NATIF. The MoST may remain the authority, but since nobody understand a firm’s financial situation better than commercial banks, they should be involved. The banks can advice the ministry on which enterprise actually has the financial capacity to make use of R&D projects, thus eliminating ghost-projects created solely for the purpose of stealing.

A mechanism to limit the amount of money provided to a project should also be employed. Should projects fail to make progress on an agreed-upon schedule, funding should be cut immediately to avoid further losses for NATIF and legal steps taken to retrieve the invested amount.

A committee of outstanding scientists and reputable officials should be formed to supervise the fund’s operation. It is absolutely crucial that the money goes to the intended beneficiaries, which are the SMEs.